UPDATE 2-JPMorgan sells physical commodities unit to Mercuria for $3.5 bln
* All-cash transaction to be completed by third quarter of this year
* Metals brokerage business to stay with JPMorgan, source says
* Mercuria is first trade house to absorb entire physical division from a bank (updates throughout with quotes, background)
By Dmitry Zhdannikov and Chris Peters
NEW YORK, March 19 (Reuters) - JPMorgan is selling its physical commodities business to Mercuria for $3.5 billion, the U.S. investment bank said on Wednesday, sweeping the fast-growing Swiss trading house into the top league of commodities traders.
The all-cash transaction for one of the most powerful oil and metals desks on Wall Street is expected to close in the third quarter, JPMorgan said in a statement.
In documents circulated to potential buyers last year, JPMorgan had valued its physical commodity business at $3.3 billion, with an annual income of $750 million. JPMorgan paid nearly $2 billion to buy the largest part of the business from RBS in 2010.
JPMorgan decided to sell its multi-billion dollar physical commodities division last year due to rising regulatory and political pressure and so it could concentrate on the bank's core business of lending.
"Our goal from the outset was to find a buyer that was interested in preserving the value of J.P. Morgan's physical business," said Blythe Masters, head of JPMorgan's global commodities business. Continuación...